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New software enables business managers to fine-tune important processes virtually on the fly, with only minimal involvement by the IT department.
John Verity, CFO Magazine
September 1, 2003
Two years ago, LexisNexis realized that its ability to serve new Web-based customers was severely strained. Thousands of small and midsize law firms represented a huge business opportunity for the company's legal-information services, but they often had to wait 48 hours to have their Web accounts activated after signing up. For smaller firms seeking to buy documents in small quantities, often to apply to pending cases, such a delay was intolerable.
Clearly, LexisNexis needed to revamp its customer sign-up and order-fulfillment processes, which were designed for large law firms and the ordering of hardcover legal tomes. But instead of spending millions on a massive new enterprise resource planning (ERP) system, LexisNexis chose a somewhat unorthodox and unproven route: by reworking some key workflows to require fewer manual tasks and installing a new kind of software (from Intalio Inc.) that choreographs the activities of several existing back-office systems, it was able to get new Web accounts running in a matter of minutes.
Equally important, though, is that the so-called business process management (BPM) software that made this speed-up possible is spurring changes within Lexis-Nexis that any company would welcome. Thanks to powerful new modeling tools that can fully describe even the most complex business processes, company executives report, the IT department is working more closely than ever with business-unit managers. Contention and misunderstanding are giving way to avid collaboration. Indeed, business managers themselves are fine-tuning important processes virtually on the fly, with only minimal involvement by the IT department.
"In my view, if there's a business process," says Allan McLaughlin, senior vice president and CIO of LexisNexis, "it's the business department that owns it, and IT's role in it should be transparent."
That's a goal, of course, for which many executives have been aiming ever since consultants Michael Hammer and James Champy began urging Corporate America more than a decade ago to start identifying and reengineering its most critical business processes. But reengineering called for a slash-and-burn approach, using automation to eliminate massive amounts of manual work. BPM, in contrast, emphasizes the monitoring and fine-tuning of business processes, as such becoming a critical business process in itself.
Howard Smith, CTO (Europe) at Computer Sciences Corp. and co-author of Business Process Management: The Third Wave, sees BPM (which should not be confused with business performance management, an emerging approach to financial analytics) as the very basis for most future enterprise software. Today's ERP and customer-management systems, Smith says, are splendid at manipulating data, but they tend to embody a single business process. By focusing on BPM techniques, however, it will be possible to create highly malleable applications that can be quickly and safely altered to handle a broad range of processes.
For example, the process of managing a sales campaign necessarily varies depending on industry, product, type of customer, and at what step in the campaign each customer happens to be. That calls for a level and kind of flexibility that packaged software often lacks. Today's BPM software can modify existing applications to make them more flexible; down the road, it may be built into many different types of software, providing new flexibility as a matter of course.
Slick technology alone won't guarantee success for the two dozen start-up companies that have made BPM a hot area, or for IBM, Microsoft, and other established companies currently touting BPM tools. Top executives must lead an important cultural change, too. But having come up during the era of reengineering, today's managers are nothing if not process-aware. They've seen how success in supply-chain management and E-commerce depends on a strong understanding of key processes. And increasingly, executives recognize that agility is essential to profitability, even in seemingly stodgy markets.
"We're always trying to improve our short-term planning," says John Wheeler, senior vice president and CIO of Nova Chemicals, which produces raw materials used to make plastics and other products. But "demand forecasts are never true." So, using BPM tools from IDS Scheer of Germany, Nova Chemicals is seeking to "be able to react faster" to unanticipated fluctuations in demand.
From a technology point of view, there are five essential BPM ingredients, says Hollis Bischoff, vice president of technology research services at consulting firm META Group:
Although the idea of continuously improving business processes has been discussed in academic and business circles for years, recent progress in several areas of technology may finally put full-blown BPM within practical reach. One key driver: Web services, a standards-based scheme that enables disparate systems and pieces of software to exchange data and work together easily without a substantial integration effort. Meanwhile, tools for measuring, analyzing, and simulating the performance of complex processes have also improved. Together, analysts say, they help create a vital feedback cycle: measure, analyze, optimize, measure again, and so on.
Simulating a process in depth can yield surprising results: How should a bank address the increased volume of loan applications it expects to receive toward the end of each fiscal quarter, for example? It might simply add more people, assigning them to manually underwrite loans of more than $10,000, as bank policy dictates. But a simulation may show that it would actually be more profitable to raise that threshold to $15,000, thereby routing a greater number of loans through the speedier automatic underwriting process. That might increase the bank's risk, but the extra business it would close might more than compensate.
Another important development is business process modeling language, or BPML, which provides a mathematically rigorous scheme for describing every aspect of a business process. Much as modern computer programming languages hide all the binary codes that used to boggle programmers' minds, BPML may provide a standard way to hide the technical plumbing and mind-numbing intricacies that make business processes tick. In fact, most process-modeling tools work visually, enabling business and IT managers to drag and drop items from a palette of icons to define new processes. When a process map is complete, the tool can translate the diagram into executable code.
And that's just the beginning. New software, called a process engine, is designed to keep track of every document and transaction involved and make sure different computers exchange the right data. The great benefit of this approach is that simply changing the high-level process model can automatically reprogram the process itself, perhaps expanding its capacity or rejiggering a few of its underlying business rules. In this way, BPM could make the enterprise itself a programmable entity, ready to turn on a dime to meet every new challenge.
In theory, anyway. For now, companies may be satisfied knowing that a tweak to a given process doesn't have to entail a technological headache as systems are retooled.
Hammer Time Again?
It was exactly 10 years ago that Michael Hammer, with his best-selling book Reengineering the Corporation, put Corporate America on notice about the vital importance of business processes. Until then, processes within corporations were more a subject for business-school theorizing than boardroom strategizing. But with Reengineering, Hammer not only contributed new words to business jargon (while raising the bar for the sale of business books), he and co-author James Champy also managed to persuade thousands of managers to recognize and rethink complex, cross-functional processes like order-to-cash, for example.
Hammer, still writing about and preaching the benefits of process-centric management, is mostly enthused by all the talk these days about business process management (BPM). Much of it builds on his original thinking. "Technology is now available that enables companies to do things with their processes that they really couldn't do 5 or 10 years ago," he says. "Technology is an important enabler of real BPM."
Hammer worries, however, that new technology is dominating the BPM discussion and distracting managers from the deep cultural changes that are needed. "I think of BPM as a way to run a business that focuses on end-to-end business processes," he says. BPM is not, he states, simply the installation of a process-modeling tool or new software that watches the flow of documents around an organization.
He is particularly dismissive of claims, heard mainly from certain providers of advanced BPM technology, that software is now at hand that can automatically translate a high-level description of some business process into executable code. He grants that modeling tools are better than ever and that "they can't hurt," but they cannot capture, much less overcome, the most important obstacles to process efficiency — the boundaries between departments of a company, "where managers typically try to hold on to their authority," he says.
"There is a burgeoning [BPM] software arena," concedes Hammer, "and I think it does give more impetus to real process work." But new technology as the sole source of processes that are more measurable, manageable, or malleable? "I'm not holding my breath," he says. "BPM initiatives need to be elevated above the nether reaches of IT and made more strategic and backed with upper management's commitment to true process thinking."